Paycom Software(US:PAYC)2025-05-08 20:05Financial Performance - Total revenues for Q1 2025 were $530.5 million, a 6.1% increase from $499.9 million in Q1 2024[122] - Recurring and other revenues increased by 7.3% to $500.0 million in Q1 2025, compared to $466.0 million in Q1 2024[122] - Net income for Q1 2025 was $139.4 million, down 43.6% from $247.2 million in Q1 2024[122] - Operating income decreased by 35.2% to $185.1 million in Q1 2025, compared to $285.8 million in Q1 2024[122] - Adjusted EBITDA for the same period increased to $253.2 million from $229.5 million year-over-year[160] - Non-GAAP net income for the three months ended March 31, 2025, was $157.7 million, compared to $146.6 million in 2024[160] - Basic earnings per share decreased to $2.49 from $4.37 year-over-year[161] Expenses - Research and development expenses rose by 23.4% to $62.3 million in Q1 2025, up from $50.5 million in Q1 2024[122] - Total administrative expenses increased by 92.6% to $260.8 million in Q1 2025, compared to $135.4 million in Q1 2024[122] - Operating expenses increased by $2.6 million in Q1 2025, driven by a $1.2 million rise in banking-related fees and a $3.3 million increase in depreciation and amortization expenses[125][132] - Research and development expenses rose by $11.8 million in Q1 2025, with total R&D costs reaching $96.0 million, a 19% increase from $80.4 million in Q1 2024[127][129] - General and administrative expenses surged by $114.1 million in Q1 2025, primarily due to a $117.5 million reversal of stock-based compensation expense[130] Cash Flow - Cash provided by operating activities increased by 23% to $182.5 million in Q1 2025, compared to $148.6 million in Q1 2024[151] - The company reported a significant decline in cash used in investing activities, totaling $(379.9) million in Q1 2025, compared to $42.3 million in Q1 2024, marking a 998% decrease[151] - Financing activities resulted in a cash outflow of $(1,452.3) million in Q1 2025, a 486% increase in cash used compared to $376.1 million in Q1 2024[151] - Cash used in investing activities increased by $342.2 million due to higher purchases of investments from client funds, partially offset by a $10.0 million decrease in property and equipment purchases[153] - Cash used in financing activities rose by $1,826.4 million, primarily due to changes related to client funds obligations[154] Tax and Dividends - The effective income tax rate increased to 26.8% in Q1 2025 from 14.8% in Q1 2024, primarily due to tax benefits related to stock award forfeiture[135] - A quarterly cash dividend of $0.375 per share was declared in May 2025, with total cash dividends paid amounting to $21.0 million in Q1 2025[144] Market Strategy - The company plans to open additional sales offices to expand market presence[115] - The average client size has grown significantly, with a focus on organizations with 50 to 10,000 or more employees[117] - The company expects to increase recurring revenues through the development of new applications and improved existing applications[113] Interest and Investments - Interest on funds held for clients decreased by 10.0% to $30.5 million in Q1 2025, down from $33.9 million in Q1 2024[122] - Interest earned on funds held for clients decreased to $4.7 million in Q1 2025 from $4.3 million in Q1 2024, despite an increase in average daily balances from $2.6 billion to $2.9 billion[124][134] - A hypothetical 100 basis points increase in interest rates would result in an approximately $24.9 million increase in interest earned on client funds over the next 12 months[164] - An immediate increase in interest rates of 100 basis points would lead to a $2.9 million reduction in the market value of available-for-sale securities[165] - The company does not enter into investments for trading or speculative purposes, focusing instead on capital preservation and liquidity needs[162]